In the matter of Natural Raw C Pty Ltd (No 2) [2022] NSWSC 1334

In the matter of Natural Raw C Pty Ltd (No 2) [2022] NSWSC 1334

The income-based valuation advanced by Mr Mullins was preferable because it was based on the Company's financial material, was an accepted method for valuing the business, and was not cogently challenged. Mr Groves' market valuation was rejected because the transactions relied on were not appropriately comparable, involved inadequate research and unsupported subjective discounts, and contained errors. There was no sound basis to reduce EBITDA for Mr Mendelsohn's director's fee. Applying Mr Mullins' multiple to the adjusted EBITDA and deducting agreed debt and surplus liabilities produced a 50% equity value of $170,437.50.

Jurisdiction
Australia
Judgment Date
30 September 2022
Procedural Posture
Corporations Act Proceedings Concerning Purchase of Shares and Valuation / Principal Judgment Fixing Purchase Price Under Consent Orders Made on 9 March 2022
Outcome
Purchase price fixed at $170,437.50; plaintiff ordered to pay the defendants' costs as agreed or assessed, with leave to seek an alternative costs order.
Legal Topics
['share Valuation' 'oppression Remedies' 'expert Valuation Evidence' 'costs']
['corporations Law' 'equity'] ['share Valuation' 'oppression Remedies' 'expert Valuation Evidence' 'costs']

Case Brief

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Procedural Posture

Corporations Act Proceedings Concerning Purchase of Shares and Valuation / Principal Judgment Fixing Purchase Price Under Consent Orders Made on 9 March 2022

Legal Issues

  1. 1 ["Whether the Court should adopt an income-based valuation or a market approach using comparable transactions to fix the purchase price of the plaintiff's shares." "Whether the adjusted EBITDA should be reduced because of the amount of Mr Mendelsohn's director's fee." "What purchase price represented fair value for the plaintiff's 50% shareholding in Natural Raw C Pty Ltd."]

Ratio Decidendi

The income-based valuation advanced by Mr Mullins was preferable because it was based on the Company's financial material, was an accepted method for valuing the business, and was not cogently challenged. Mr Groves' market valuation was rejected because the transactions relied on were not appropriately comparable, involved inadequate research and unsupported subjective discounts, and contained errors. There was no sound basis to reduce EBITDA for Mr Mendelsohn's director's fee. Applying Mr Mullins' multiple to the adjusted EBITDA and deducting agreed debt and surplus liabilities produced a 50% equity value of $170,437.50.

Court Disposition

Purchase price fixed at $170,437.50; plaintiff ordered to pay the defendants' costs as agreed or assessed, with leave to seek an alternative costs order.

Orders

  • ['For the purposes of Order 1 made on 9 March 2022 by Black J, the purchase price is fixed at $170,437.50.' "The plaintiff is to pay the defendants' costs as agreed or assessed." 'Grant leave to any party to approach my Associate by email within 7 days of the date of this judgment, should an alternative costs order...